Donald Trump Canada Trade Tariffs

In a sharp escalation of trade tensions with a close ally, former U.S. President Donald Trump has threatened to impose “100% tariffs” on all Canadian exports to the United States if Canada enters into a new trade deal with China. This extraordinary ultimatum, delivered via social media, has raised the specter of a full-scale trade war between the neighboring nations, rattling policymakers in Ottawa and drawing concern from international business leaders.

Trump’s warning comes amid reports that Canada is exploring deeper trade ties with Beijing, specifically regarding electric vehicles (EVs) and critical minerals. As longstanding economic partners under the USMCA (CUSMA), the U.S. and Canada face a renewed strain as Trump signals a hardline stance tying North American trade stability to Canada’s relations with China.

“China will eat Canada alive, completely devour it, including the destruction of their businesses, social fabric, and general way of life,” Trump asserted, warning that any deal with China would trigger immediate punitive tariffs. He even provocatively suggested Canada could become the “51st U.S. state.”

What’s Behind the Latest Tariff Threat?

Trump’s ultimatum appears triggered by concerns over Canada’s trade relations with China, especially in the surging electric vehicle industry. Chinese EV manufacturers like BYD and Geely are expanding globally, often supported by state subsidies that have already drawn the ire of European and U.S. regulators.

Under Prime Minister Justin Trudeau, Canada previously explored a free trade agreement with China starting in 2016. While those talks stalled in 2018 following the arrest of Huawei executive Meng Wanzhou, recent stirrings of engagement—particularly in the battery supply chain and critical minerals like lithium—have reignited Washington's anxieties.

This tension was further highlighted by Mark Carney’s recent appearance at the World Economic Forum in Davos. Carney, a prominent Canadian economist, warned against the risks of "economic decoupling" and advocated for managed global cooperation. Trump’s pointed reference to "Governor Carney" suggests he viewed these calls for engagement with China as a direct threat to U.S. economic interests.

Flashback: The 2018-2019 Steel and Aluminum War

This is not the first time trade relations have reached a boiling point. In 2018, the Trump administration invoked Section 232 of the Trade Expansion Act to apply 25% tariffs on steel and 10% on aluminum imports from Canada, citing national security concerns.

Prime Minister Trudeau called the move “insulting,” leading Canada to retaliate with $12.6 billion in tariffs on U.S. goods ranging from ketchup to bourbon. The friction eventually led to the renegotiation of NAFTA into the USMCA, which included the controversial Article 32.10—a “China clause” that effectively gives the U.S. a veto over any member's trade deal with a non-market economy.

German Chancellor Angela Merkel stands over U.S. President Donald Trump during a tense discussion at the 2018 G7 Summit in Quebec. Photo: Jesco Denzel/Bundesregierung via Wikimedia Commons.

Canadian Leaders Respond: “We Won’t Be Pushed Around”

The response from Ottawa has been one of calculated defiance. Prime Minister Trudeau, echoing his sentiments from 2018, emphasized that Canada will make decisions based on its own national interest.

“As a sovereign nation, Canada will choose whom we trade with,” Trudeau stated. “We will always stand up for Canadian workers and industry.” Deputy Prime Minister Chrystia Freeland added that a 100% tariff would be “economically suicidal” for both nations, given the deeply integrated nature of their supply chains.

Economic and Legal Consequences

Trade experts warn that a 100% tariff would be unprecedented. Canada sends approximately 75% of its exports to the U.S., a flow valued at over $600 billion annually. A blanket tariff of this magnitude would effectively act as a trade embargo, doubling the cost of everything from crude oil and lumber to automotive parts.

Potential Impacts:

• Automotive Industry: Supply chains cross the border multiple times during production. Tariffs would halt assembly lines in Ontario, Michigan, and Ohio.
• Consumer Costs: U.S. households would see immediate price hikes on gasoline, fresh produce, and vehicles.
• Legal Challenges: Such tariffs would likely violate USMCA and World Trade Organization (WTO) rules, though the U.S. could attempt to invoke national security loopholes.

Global Market Jitters

The threat has sent ripples through international markets. Some analysts suggest that prolonged trade volatility in North America might make European markets, such as the FTSE 100, more attractive to investors seeking stability.

Meanwhile, Beijing has watched the rift with interest, urging "constructive dialogue" while remaining open to filling any economic vacuum left by a U.S.-Canada fallout. However, Canadian analysts remain wary of China’s own history of using trade as a political weapon.

What’s Next for U.S.-Canada Trade?

While no official tariff action has been taken by the current Biden administration, the threat serves as a potential blueprint for a second Trump term. For now, diplomats and business groups are working to lower the temperature, stressing that the integrated North American market is vital for competing against China, not for fighting within the alliance.

Canada continues to diversify its portfolio through agreements like CETA with the EU and the CPTPP, but the U.S. remains its most essential—and currently most volatile—partner.

FAQ: Donald Trump, Canada, and Tariffs

Q: Why is Trump threatening Canada now?

A: Trump is reacting to reports of Canada seeking closer trade ties with China, specifically regarding the import and manufacturing of electric vehicles (EVs), which he views as a threat to American industry.

Q: Has a 100% tariff ever been applied to Canada before?

A: No. Historically, tariffs have been targeted at specific sectors (like the 25% steel tariffs in 2018). A 100% tariff on all goods would be an unprecedented move in modern trade history.

Q: Can Canada retaliate?

A: Yes. Canada has a history of "measured and reciprocal" retaliation, as seen in 2018. However, because Canada is much more dependent on the U.S. market than vice versa, a full-scale trade war would be significantly more damaging to the Canadian economy.

Q: What does Mark Carney have to do with this?

A: Trump specifically called out Carney following his speech at Davos, where Carney advocated for global economic cooperation. Trump views Carney’s globalist stance as antithetical to his "America First" policy.

Q: Is the USMCA still in effect?

A: Yes, the USMCA (or CUSMA in Canada) governs trade between the U.S., Mexico, and Canada. Any move to impose 100% tariffs would likely require the U.S. to formally withdraw from the agreement, which requires a six-month notice period.